DOF seeks uniform rate for 'sin' items
By Michelle Remo
Philippine Daily Inquirer
First Posted 18:19:00 11/02/2008
Filed Under: Tobacco, Alcohol, State Budget & Taxes
MANILA, Philippines--Department of Finance officials believe that the government will generate nearly P19 billion in additional tax collection once uniform tax rates for all "sin" products are adopted.
The current system imposes varied tax rates on cigarettes and alcoholic beverages--four tax rates for cigarettes and 11 for alcohol products--which makes administration difficult, the DOF said.
If uniform tax rates were adopted, it added, the easier tax administration would raise tax collection, it said.
Under the DOF's proposed bill, low- and medium-priced cigarettes will be taxed P8 a pack, while high-priced and premium cigarettes shall be taxed P14 a pack, in the first year of implementation. In the second year, all cigarettes will be taxed P14 a pack.
Also, all fermented liquor shall be taxed P21.52 per liter, all distilled spirits P20.38 per proof liter, and all sparkling wines P502.41 per liter in the first year.
The DOF also proposes that in the succeeding years of implementation, the tax rates must be adjusted to the products' inflation on an annual basis. This is to ensure that tax collection rises with the increase in prices, it said.
In a paper it submitted to the House of Representatives, the DOF estimated that the government would collect P18.6 billion in additional tax collection in the second year of the proposed law's implementation--when all cigarettes and alcoholic products are covered by uniform tax rates.
The DOF also estimated that in the first year of the proposed law's implementation, the government could generate P12.9 billion in incremental revenues, arising from the two tax rates imposed on cigarettes.
The DOF cites the need for new revenue measures now that the government has decided to grant income tax relief to individuals.
Last July, Republic Act No. 9504 took effect. The law exempted minimum wage earners from income tax and increased the personal exemption of all individual taxpayers to a uniform rate of P50,000 a year.
According to the DOF's calculations, the government will lose P19 billion in potential tax collection next year due to RA 9504.
The law was passed to help households cope with the rising prices of commodities, especially since fuel prices surged to historic highs earlier this year.
Finance officials said that the government could not afford the huge revenue loss. This is because the government needed to spend more on infrastructure and social services as a means to pump-prime the economy amid a global economic downturn.
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